AUS
NZ
UK
CA
USA
IND
Summary
- The RBNZ keeps OCR unchanged in its monetary Policy review.
- Hike in interest rates being expected as early as August.
- Consumer market index and labour market data to influence further developments.
With the updates laid out by the RBNZ on Wednesday, its clear that the bank shall focus on a tightening policy only after the relative policies regarding employee welfare as well as inflation are achieved. The RBNZ announced on Wednesday a stop to the bond purchase program, which is valued at NZ$100 billion and resulted in the NZ dollar soar, because it was believed that a rate hike is to follow soon.
Also read: RBNZ adds debt serviceability restrictions to its toolkit
Image Source: Copyright © 2021 Kalkine Media
Important meeting updates
Though the official cash rate by the RBNZ was given out to be 0.25%, it was called upon by several local banks in the near future, starting from as early as next month. This would mean New Zealand would become one of the first countries to increase interest rates post the implications of the pandemic. The Funding for Lending Programme also hasn’t undergone any change in the latest meeting.
Don’t miss: ANZ expects RBNZ to hike rates in February 2022 after remarkable GDP numbers
According to a leading economist, the RBNZ has already done its bit in terms of preparing the market for the anticipated hike in August. The rest shall be taken care of by the data from the labour market as well as the consumer price index.
The US influence and parallel developments
These developments come as the inflation data in the US witnessed a 13-year high, which added to the doubts about whether these pressures of inflation are transitional in nature and how much of an impact it has on the tightening of the monetary policies. After the announcement, there was a 1.1% rise witnessed in the New Zealand Dollar.
Also read: RBNZ’s Statement of Intent says vulnerabilities remain despite recovery
Right in the beginning of the meeting, it was laid out that the Committee for Monetary Policy agrees with a low-risk and regret kind of policy which means that the current level of monetary support which has been at work since the mid 2020, could soon be reduced in order to reduce the risk of not being able to fulfil its requirements.
Is the worst over?
The committee members agreed that the main risks such as increase in unemployment rate as well as deflation have reduced to a minimum now. This has been possible due to the RBNZ’s actions where it had slashed the interest rates to a bare minimum back in March 2020, whilst pumping several billions towards curbing the effects of the pandemic on the economy.
Also read: New Zealand dollar up after RBNZ signalled rate hikes next year
